IPG Rewarded For Stock Upswing
Interpublic Group common stock achieved a milestone recently that will save the company nearly $12 million a year in debt.
On Oct. 11th, the stock traded at above $16.69 for 20 out of the previous 30 (or fewer) trading days. That’s territory that IPG shares haven’t traded for on a sustained basis for about a decade.
Meeting that benchmark enabled the company to exercise an option to force the conversion of some expensive Series B Preferred Stock that it issued back in 2005 to raise $525 million. Back then the company had a difficult time borrowing money at reasonable rates because it was embroiled in an accounting scandal. That same year it restated earnings from 2000 to 2004, taking a $550 million charge.
That particular Series B issue was a bit of a double whammy in that it had a high coupon rate that yielded $11.6 million a year in dividends and also never matured. Unless, that is, the note holders agreed to sell them back (about half of them did in 2010) or the company’s common stock reached the aforementioned 20-day trading benchmark.
On Tuesday, IPG issued a press release announcing the forced conversion of the Series B stock, effective Oct. 17. The company declined to comment beyond the press release.
Sources noted that IPG’s common stock has no doubt been helped by the pending POG merger, with some investors buying up shares anticipating that IPG could be involved in a further consolidation move. But some analysts note that IPG has been performing better in recent quarters. Pivotal Research analyst Brian Wieser noted recently that “IPG looks good given a solid new business record in recent periods and an ongoing commitment to margin improvements.”
And while $12 million in annual debt savings isn’t quite comparable to the windfall IPG received from the sale of its Facebook stock—about $225 million (give or take) on an initial investment of $2.5 million—it’s not exactly chump change. And over an eternity it adds up.